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Using Excel (if applicable), Amaco is considering a new project whose data are shown below. The...

Using Excel (if applicable),

Amaco is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life according to MACRS and depreciation rates for such equipment are 33%, 45%, 15%, and 7% for Years 1 through 4, respectively. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 2 cash flow?

Equipment cost (depreciable basis)

$100,000

Sales revenues, each year

$60,000

Operating costs (excl. depreciation)

$25,000

Interest expense

Tax rate

$4,000

20%
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Answer #1

To calculate cash flor for year 2, we first need to calculate EBITDA, Depreciation, EBIT, Net income and then the operating cash flow. Calculations are shown below.

Year 2 cash flow = $32000

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